Moody's Gives ARCP the Nod with Investment Grade

NEW YORK CITY-As it prepares to finalize two mergers that will turn it into the second largest publicly traded REIT in the net lease space, American Realty Capital Properties has been assigned a Baa3 investment grade corporate credit rating by Moody's Investor Service with a “stable” outlook. This outlook reflects Moody's viewpoint that ARCP will continue to grow successfully, improve credit metrics and maintain adequate liquidity even as its pending mergers with CapLease and American Realty Capital Trust IV will bumps up its enterprise value from the current $3 billion to $10 billion.

Moody's is basing its investment-grade rating on ARCP's portfolio of well diversified, well-occupied, freestanding, single-tenant, triple-net leased properties throughout the US and Puerto Rico, which are leased to a high number of investment-grade tenants. Furthering the rating are the company's manageable lease expiration and debt maturity schedules, and sizable pool of unencumbered assets.

The ratings agency further notes that ARCP has a highly engaged Board of Directors and has established a strong set of formal procedures. Notably, ARCP will become internally managed no later than year-end 2013, which is a key consideration in the rating.

Currently it's externally managed by ARC Properties Advisors LLC, the executive officers of which include Nicholas Schorsch and Brian Block, who are also founders of ARCP. It's expected that Schorsch and Block will serve as executive chairman and CFO, respectively, for ARCP post-merger, while searches are under way to fill the roles of president, COO and general counsel.   

Schorsch, chairman and CEO of ARCP, says “couldn't be more pleased to have been assigned by Moody's an investment-grade corporate credit rating. We have grown our company significantly into a leading publicly-traded net lease REIT since our initial public offering in September 2011. Our substantial efforts to create a fortress balance sheet have been rewarded by Moody's.”

He adds that in the net lease sector, where a low cost of capital represents a considerable competitive advantage, “this investment grade rating provides a solid foundation for our low cost borrowings.  We will continue to use this capital cost advantage to match fund our liabilities and ladder our maturities.”